Portugal under pressure to accept financial help from the EU (Reuters) (10-01-2011)

BRUSSELS – Portugal is being under pressure from Germany, France and other euro zone countries so as to accept financial help from the European Union and the International Monetary Fund so as to stop debt crisis from spreading.

No formal talks on aid have started yet, a number of euro zone sources said, but the pressure was rising in the Eurogroup, which brings together euro zone finance ministers.

Earlier on Sunday, a Portuguese government spokesman denied a German magazine report that Lisbon was under pressure from Berlin and Paris to seek a bailout from the European Union and International Monetary Fund.

Many policymakers hope EU/IMF financing for Portugal would ring fence the euro zone debt crisis, in which Greece and Ireland have taken bailouts.

The growing pressure on Lisbon leads to a sharp rise in Portuguese 10-year bond yields at the end of last week to euro lifetime highs above 7 percent, as investors worried about the prospect of up to 1.25 billion euros of bond supply it will offer at an auction on Wednesday.

The yield of five-year Portuguese bonds on the secondary market is 6.43 percent and 10-year paper trades at 7.26 percent. Economists expect a key question for Portugal to be able to sustain the high yield levels and the auction.

Source: Reuters